China economy

A huge bonfire of the brands awaits auto manufacturers in China as some 90m car owners prepare to disregard loyalty when they chose their next model.

A survey of some 2,400 car owners conducted by the Boston Consulting Group (BCG) found an itch to switch brands among 83 per cent of respondents who drove domestic Chinese brand cars. Of these, only 30 per cent said they would drive another domestic brand as their next car, while a full 40 per cent said they planned to plump for a Volkswagen.

The findings suggest that the next big trend for auto manufacturers in the Chinese market – which has expanded tenfold since 2000 to register annual sales of around 20m units – may not be so much concerned with chasing growth as with inculcating brand loyalty. Continue reading »

China’s leading credit rating agency will soon begin to provide English language ratings for local Chinese debt in the latest sign of a growing desire on the part of international investors to access the country’s highly restricted domestic debt markets.

“Dagong is making preparations to release ratings for onshore debt in English early next year,” the company’s chairman, Guan Jianzhong, told beyondbrics. “There are more international investors looking at Chinese debt.” Continue reading »

By Rafael Halpin, China Confidential

For a sector regularly called “the most important in the universe”, there is a remarkable lack of consensus over the Chinese housing market. Much of the debate boils down to whether China is currently under- or over-supplied with homes.

The absence of any comprehensive data on just how many houses there are in China, has led to wildly divergent views. But, as we will seek to demonstrate in this article, despite the lack of any solid data on the total number of homes in China, it is still possible to present a strong statistical case that the market is currently under-supplied with modern housing.  Continue reading »

By Bo Zhuang of Trusted Sources

Overhauling state-owned enterprises (SOEs) is key to the Chinese growth story for the next 10 years. But, while the approach being taken by the Xi Jinping leadership acknowledges the need for change, it also stresses the parallel need to strengthen the Communist Party State. This could mean reform will take a rather different form to the assumptions of markets, which have risen on the back of expectations of market-friendly change. Continue reading »

By Jim O’Neill, Bruegel

Is it all over for the rise of the BRIC grouping (Brazil, Russia, India and China)?

On one level, this seems like a rather odd time to be asking such a question, especially when the political leaders of the BRICS countries (the four named above plus South Africa) have recently agreed to set up a joint development bank to be headquartered in Shanghai. So, the BRICS name is certainly here to stay, and in terms of global governance, their influence is likely to rise as a group because of the bank. Continue reading »

By Hayden Briscoe and Hua Cheng, AllianceBernstein

In spite of worries about a collapse in China’s property market, we think that the financial system will navigate the coming credit cycle if banks can buy time to resolve loan problems — and receive government support if needed. Continue reading »

By Hayden Briscoe and Jenny Zeng, AllianceBernstein.

Concerns about a possible collapse in China’s property market continue to grow. However, our research suggests that fundamentals are more robust than many people think. The biggest danger lies in the potential for policy mistakes.

Investors are understandably worried about the headlines coming out of China’s property sector. Sales fell in July after having seemed to stabilize in June. For the first half of this year, sales nationally fell by 6.7% year over year, to Rmb3tn (US$488.4bn). That’s the first time such a steep fall has occurred since 2011. Continue reading »

By Paul Hodges of International eChem

China’s July lending level of just Rmb 385bn ($62.6bn) has surprised financial markets, which were expecting an increase in stimulus. But bigger surprises may lie ahead.

The strong link between lending and passenger car sales suggests we may be about to see major changes in the world’s largest car market.

The key to forecasting China’s auto demand since 2008 has been the level of bank lending, as the chart below shows. Continue reading »

By Andrew Collier, Orient Capital Research

The threat of a collapse in the shadow banking market looms over China like a hawk swooping down on its prey. Shadow loans are made outside the formal banking system and are only lightly regulated, making them a significant source of financial stress if the Chinese economy slows significantly. One of the biggest source of shadow loans, Trusts, is showing signs of weakness that could turn into a big problem for China’s economy.

There now is a staggering Rmb 11.7tn in outstanding Trust loans, approximately one-quarter of the entire shadow banking market. Using a list of 31 failed Trusts supplied by the Central University of Finance and Economics in Beijing, we examined them to see what they tell us about the fate the entire Trust industry – and by extension shadow banking in China.

What we found is a disturbing harbinger of things to come for China’s economy. Continue reading »

By Andy Rothman, Matthews International Capital Management

Statistics announced on Wednesday do much to challenge the view that sub-par Chinese consumer spending is to blame for the sluggish rebalancing of the world’s second largest economy away from an over-reliance on investment. For too long this opinion has obscured the crucial truth that China is actually host to the world’s best consumer story.

Real retail sales rose 10.7 per cent in June and 10.8 per cent in the first half of this year, compared to the year earlier period. The strong momentum of this spending springs from solid foundations, with real urban household disposable income rising 7.1 per cent, up from 6.5 per cent a year ago. Continue reading »

By Shaomin Li of Old Dominion University

Saturday evening at a concert hall parking lot, the cars move like sharks, hunting for a parking space. When they find one, some drive in head-on, while some make the effort to reverse.

Obviously, reversing in takes more time and effort than driving in head-on. But it makes it easier, quicker, and safer to exit. So we may conjecture that people who take the trouble to back their cars in demonstrate an ability to delay gratification: they are happy to invest more time and effort now to enjoy the fruits of their labour later. Continue reading »

It’s been three months since Ma Jun – sell-side economist and well-known China bull – quit the world of investment banking and moved from Deutsche Bank to the People’s Bank of China.

Now the German bank has found a replacement – poaching China bear Zhang Zhiwei from Nomura. With apparently rather divergent views on where the economy is heading, either Deutsche or Zhang is likely to be revising its forecasts pretty soon. Continue reading »

Banks intensified their squeeze on mortgage borrowers in China in June, contributing to another sharp decline in real estate sales for the month and ratcheting up the pressure on several city government finances.

Data collected by China Confidential, a research service on China at the Financial Times, showed that only 5 per cent of first time buyers were able to secure a mortgage below the benchmark interest rate. This compared with 8 per cent in May and 39 per cent in June 2013, according to China Confidential’s monthly survey of 300 real estate developer sales offices in 40 cities across the country. Continue reading »

Two of China’s stodgiest state-controlled entities locked horns this week as state broadcaster CCTV accused a major state bank of money laundering and violations of the country’s foreign exchange rules.

In a report aired on Wednesday, China Central Television claimed that Bank of China (BOC), the country’s fourth largest lender, was helping clients circumvent foreign exchange controls using a service called “Youhuitong,” a play on words that translates as “Preferential Transfer Channel.”

The incident highlights the many regulatory grey areas that have emerged as China has launched a slew of financial reform pilot programmes. Many such programmes take the form of broad guidelines, while detailed regulations appear much later, if at all. Continue reading »

If you’re an emerging market and there’s a geoeconomic grouping you’re looking for, you’ve got a few to choose from. In Asia there is Asean - ten countries in search of common ground. In Latin America there is Mercosur - five countries in search of common tariffs. And from the Atlantic west to the Black Sea there is Asia-Pacific Economic Co-operation – four adjectives in search of a noun.

But none of these has the distinction of having been a marketing campaign by Goldman Sachs got out of control. The Brics nations, apparently noticing a small clearing in the densely-thicketed field of international relations, seized on the designation to set up their own diplomatic process. The sixth leaders’ summit will take place next week in Fortaleza, Brazil, with the host nation hopefully performing better than at its other major international gathering.

 Continue reading »